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UKRAINE


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 49,537 41,380 37,600 55
         
GNI per capita
 US $ 970 770 720 137
Ranking is given out of 208 nations - (data from the World Bank)

Books on Ukraine

REPUBLICAN REFERENCE

Area (sq.km) 
603,700 

Population 
47,732,079

Principal 
ethnic groups 
Ukrainians 72.7%
Russians 22.1%
Jews 0.9%. 

Capital 
Kiev

Currency 
Hryvnya

President 
Viktor Yushchenko




Update No: 295 - (26/07/05)

Ukrainian parliamentarians break out into a mélée 
An unseemly fight broke out in parliament, the Verkhovna Rada of Ukraine, on July 7th when deputies made accusations addressed to the speaker of parliament, Volodymir Litvin. The deputies accused Litvin of biased conduction of the session and prejudiced submission of drafts, adoption of which was advantageous to him. 
In response to the accusations, Litvin replied that he did not lobby anyone's interests and tried to conduct the session according to corresponding rules. After that the deputies attacked the Presidium of Verkhovna Rada (VR), using their fists. 
During this outrage, two deputies pulled the jacket over the head of its owner and one deputy was set down in the presidential chair and thrown out of it. One deputy had actually bitten the premier of Ukraine, Julia Timoshenko, and was escorted away. 
The angry deputies pulled out the chair from under Litvin, and then they took Litvin's microphone away and chucked him out of the hall.
After that Timoshenko and several ministers left the Hall. The first vice-speaker of VR, Adam Martinyuk, announced a half hour break. Representatives of deputy groups and factions left for Conciliatory Council.

Timoshenko the real radical; as Yushchenko holds back
This most unparliamentary behaviour reflects profound differences of opinion. Six months after Ukraine's Orange Revolution, growing rivalries among its leaders are threatening planned political and economic reforms.
Allies of Viktor Yushchenko, the mild-mannered president, and Tymoshenko, the firebrand prime minister, are splitting into competing camps. Yushchenko himself has tried to stay about the fray and assert his authority over both factions. But he is struggling to hold together a disparate alliance that united to overthrow former president, Leonid Kuchma, but is now starting to come apart. Yushchenko said: "I'm happy to have dialogue (with my colleagues). But if somebody questions a decision after it is made, there might be a problem. I will not allow that."
The Orange Revolution's supporters are worried that the conflicts could increase over the next few months as the competing factions prepare for parliamentary elections next March. One group is formed of politicians close to Yushchenko and led by Petro Poroshenko, the National Security Council Secretary, which is cautious in its approach. Ms Tymoshenko leads the other group, which includes Viktor Pynzenyk, the finance minister, and is advocating bolder measures.
Mr Poroshenko, a businessman with interests in confectionery, banking and media, favours pro-business policies. On the vital question of a review of questionable privatisations carried out by Mr Kuchma, Mr Poroshenko supports examining only a limited list of deals for fear of upsetting business and delaying new investment.
Ms Tymoshenko, a populist who enjoys strong support among poorer Ukrainians, has argued for a wider assault on the assets of business people linked to Kuchma. She also wants to end tax-minimisation schemes such as transfer pricing, used aggressively by Ukraine businesses. Asked about her conflicts with Poroshenko, Ms Tymoshenko declined to name names but broadly explained the rivalry within Yushchenko's team as an argument between those she saw as dedicated public servants and those who "came to increase their capital and re-divide property, not for the sake of creating a competitive economy, but for their own benefit."
Poroshenko said he was glad there were many businessmen in Yushchenko's administration because they had proved their effectiveness. All his own shares were placed in an independent trust and he denied that he looked out for his companies' welfare.
Poroshenko and Ms Tymoshenko insist they share Yushchenko's vision of modernising Ukraine, joining the World Trade Organisation and pursuing membership of the European Union. All three leaders also boast of increasing social spending in this year's budget and there is broad agreement on the principle of the privatisation review.
Poroshenko and Ms Tymoshenko have often publicly disagreed and, when Yushchenko has intervened, he has usually come down on Poroshenko's side - for example, in arguments over the extent of the privatisation review (where Yushchenko supports only limited action) and the capping of petrol prices.
Poroshenko, Ms Tymoshenko and Yushchenko all say they would try to form a joint bloc for next year's parliamentary elections. The vote is important because it will be preceded by reforms that would transfer many of the president's considerable powers to the prime minister and make the prime minister answerable to parliament. Timoshenko's hand would be greatly strengthened against Yushchenko.
Kuchma secured these reforms last December in return for agreeing electoral law changes that paved the way for the re-run of the disputed presidential election that brought Yushchenko to power. Yushchenko would naturally now like to cancel the reforms; but parliament has refused. Yushchenko is considering over-ruling parliament by holding a referendum. The courts will soon rule whether that is possible.

Realism after Orange Revolution
Six months after Ukraine's Orange Revolution, the international investment community's euphoria about the nation's prospects for an economic and political overhaul has been replaced a more sober assessment of the country's outlook.
But despite signs of tensions in Ukraine's new government about Kiev's economic course, in particular in the run-up to next year's parliamentary elections, analysts remain confident that the country will be able to press on with reforms and to continue to draw closer to the European Union. "I think overall there is still substantial optimism - both medium-term and long-term - about Ukraine's prospects," Deutsche Press-Agentur (dpa) quoted Rory Macfarquhar, analyst with Goldman Sachs in Moscow, as saying. "This is both in terms of market reforms and clean government issues as well as closer relations with Europe," he said.
Indeed, despite the crisis that has engulfed the EU's ambitions for enlargement that followed French and Dutch referendums, the EU's new member states, such as Poland and Lithuania, continue to push for deepening Europe's economic ties with Ukraine and shoring up Kiev's credentials as a candidate for joining the 25-nation bloc. "People are very interested in seeing how the story will develop with regard to the EU," said Jon Harrison, emerging markets strategist with Dresdner Kleinwort Wasserstein in London with international investor interest in Ukraine helping to bolster the national currency, the hryvnia.
Meanwhile, a dramatic reduction in tariffs announced by Kiev in March and a 3-year action plan with Brussels is helping to underpin economic links with the EU. With a population of about 49m, Ukraine represents a potentially large new market in Central and Eastern European region's fast-paced economy.
In addition the nation is expected to turn in a growth rate of this year of about 7% (after 12% in 2004) with foreign investment in the nation expected to double this year from what has been a low base compared to neighbouring countries. But, as economic uncertainties surrounding the nation have emerged in recent years, income growth in Ukraine has slowed, increasing by about 5% in the first 4 months of this year. But that was down from the 12% recorded in the same period last year.
In the meantime, support in both the White House and the US Congress for Yushchenko's political and economic agenda could mean, said Lars Christensen from Danske Bank in Copenhagen, that Ukraine joins the World Trade Organisation before Russia.
Apart from the No votes in the French and Dutch referendums which has cast doubts on the EU expansion drive, the more measured approach taken by investors to Ukraine follows conflicting signals out of Kiev over its plans for renationalising of companies that were sold off by the former Moscow-backed government. "There has been a dose of realism for investors," said Macfarquhar. "It is 'old Europe' which is definitely more hesitant about feeding Ukraine's hopes," he said.
Further underscoring the role played by Warsaw in sponsoring Kiev's EU aspirations some international companies are considering using neighbouring Poland as a spring-board into Ukraine. Poland and Lithuania were two of eight Central and Eastern nations that formally signed up for EU membership in May last year.
However, even before the fall-out from the resounding No votes in France and the Netherlands plunged the EU into a period of soul-searching about its future, analysts believed that investing in Ukraine involved considerable risks. 
Analysts say Kiev also faces pressure to maintain the social payments system of the previous governments as well as they are concerned about how Yushchenko will seek to rebuild political ties with supporters of the former regime, who tend to look more towards Russia than those backing the president and his campaign to join the EU. Despite the push by Yushchenko to refocus his country on western Europe, more than 35% of Ukraine's trade is with Russia.
Nevertheless, Julia Tsepliaeva, economist with ING Bank in Moscow, remains upbeat that Kiev will be able to overcome its current problems and to forge ahead with economic change. "There are substantial short-term risks because of this privatisation process," she said. "But after 2006, Ukraine should enjoy a much improved situation."

Turkmen gas to the rescue?
Ukraine is trying to lessen its reliance on Russia for energy supplies, which periodically causes a rumpus with Moscow, as in May-June this year.
In September 2005, Ukraine and Turkmenistan might sign a 25-year contract on supplies of Turkmen natural gas to Ukraine, which will turn the Central Asian republic into Ukraine's main gas supplier. "I have handed over Ukrainian President Viktor Yushchenko's invitation to President Saparmurat Niyazov of Turkmenistan to visit our country and sign the contract on natural gas deliveries to Ukraine for the period of 25 years," Alexei Ivchenko, the board chairman of Naftogaz, Ukraine's national oil and gas company, told a news briefing at the end of June. 
Ivchenko said Niyazov had given his verbal agreement to visit Ukraine in September. 
"Ukraine is drafting the contract," said Ivchenko. "We expect Turkmenistan to supply 60 billion cubic meters of natural gas (a year) to Ukraine." Ivchenko did not disclose how much the contract was worth, saying it was a commercial secret. He said the contract might come into force in 2007. 
Turkmenistan supplies natural gas to Ukraine via Russia and satisfies about 50% of the country's demand for the fuel. 

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ENERGY

World Bank loans Ukraine 106m for hydroelectric power 

Ukraine's reform-minded government scored a financial victory recently by securing a multi-million dollar loan from the World Bank to develop hydroelectric power, according to UT-1 television news report. The US$106m credit will run for 18 years with a six-year grace period. The loan is the first instalment of a US$374m World Bank project aimed at bringing Ukraine's national hydroelectric power infrastructure - among Europe's largest - to modern standards.
The Ukrainian state-owned company Ukrhidroenergo will use the money to overhaul six dams on the Dniepr River, and a seventh on the Dniestr River. Once complete the programme will be the largest foreign assistance project in Ukrainian history, after aid for the Chernobyl nuclear power disaster. Besides dam repair the World Bank loan will enable Ukrhidroenergo to purchase 70 new turbines for nine hydroelectric power stations. Much of the money will remain in the Ukrainian economy as the Kharkiv-based company Turboatom, one of the world's top producers of hydroelectric turbines, is expected to win the tender to fit out the power stations.
Ukraine generates 8.7 per cent of its electricity using hydroelectric stations. Another 38 to 40 per cent is produced by nuclear energy and the remainder by fossil fuels.
Ukraine hopes to increase the share of water-produced power in the mix by improving the efficiency of its hydroelectric stations, half of which were built in the 1930s, and have been poorly maintained since then.

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FOOD & DRINK

Danone to set up production in Ukraine

Leading French food company, Danone, plans to set up production in Ukraine, a source familiar with the company's plans said, Interfax News Agency reported.
The source said that production might be started in 2005. The amount of investment in this project and the capacity of the future plant have not yet been disclosed. Danone products are currently imported into Ukraine.

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FOREIGN COOPERATION

Polish, Ukrainian presidents witness car, steel plant deals 

The presidents of Poland and Ukraine presided over the signing of two major bilateral industrial deals at the VIII Poland-Ukraine Economic Forum in the Baltic port city of Gdynia recently.
Poland's Alexander Kwasniewski and Ukraine's Viktor Yushchenko watched as Ukraine's Avtozaz motor company formally inked a deal for the takeover of 20 per cent of shares in Poland's troubled FSO car plant and the acquisition of Poland's Huta Czestochowa steel mill by Ukraine's Industrial Union of Donbass.
Ukraine's Avtozaz already buys up almost all of FSO's output, using the parts from the Polish plant in the assembly of Daewoo models at Avtozaz car works in Ukraine.
FSO produces Daewoo Lanos and Matiz model cars and car parts. There has also been media speculation over whether a new-model Lanos or perhaps even a General Motors-made Chevrolet model may be introduced to the FSO product line. US carmaker GM took over part of South Korea's insolvent Daewoo which had previously controlled 80 per cent of FSO.
The FSO plant currently employs more than 2,000 workers who have lived in uncertainty since the company hit hard times in 1999 when Daewoo became insolvent. The company then handed over control of its 80 per cent share in FSO to Poland's State Treasury.
The presidents also presided as officials from Ukraine's Industrial Union of Donbass sealed the deal for Poland's state-held Huta Czestochowa steel mill.
Donbass had managed to out-manoeuvre Indian-owned titan Mittal Steel which dominates the Polish steel market with seven million tonnes of annual production. Mittal Steel fell out of the running for Huta Czestochowa after failing to agree on a labour package with the mill's unions. Donbass succeeded in subsequent labour negotiations.
Kwasniewski also called on other EU states to adopt free visas for Ukrainians similar to those granted by Poland which joined the EU in May 2004. "I am convinced that we as the European Union should adopt the standard which for many months has been in force in Polish-Ukrainian relations - no visas to Ukraine and free visas for Ukrainians to all EU countries," Kwasniewski was quoted by the Polish PAP news agency as saying.
"This is our postulate, which I am putting forth vocally to our EU partners and I believe that it will be accepted," he said.
Kwasniewski also backed Ukraine's drive for closer ties with NATO and its drive for closer ties and eventual membership in the European Union. "I trust that no one will lack the energy, conviction and determination that will strengthen an independent Ukraine and a sovereign Poland and build our strong position in Europe," he said.
Poland, both at the political and social level, was the strongest European backer of Ukraine's recent pro-democracy "Orange Revolution" and has since demonstrated consistent diplomatic support for Ukraine's drive for closer integration with Western European institutions.
Yushchenko, a key leader of the Orange Revolution and enthusiastic pro-market reformer, echoed Kwasniewski. "Today we clearly say we are a country which is aiming for European integration. We are an integral part of European integration," he said.
Yushchenko also told Polish and Ukrainian business leaders gathered at the bilateral business forum they should be a driving force in the further integration of Europe.

Ukraine, Macedonia to cooperate 

The presidents of Ukraine and Macedonia announced plans on June 27 for cooperation on high-tech manufacturing and energy development. The main means of developing the sectors will be via joint ventures between state-owned companies in the two countries, Macedonia President Branko Crvenkovsky was quoted as saying by the Interfax News Agency. 
Crvenkovsky was in Kiev on a one-day visit to his counterpart Viktor Yushchenko. The pair met in the morning in one-on-one talks, and later jointly chaired expanded discussions devoted primarily to economic issues. Negotiations produced an agreement for the two countries' high-tech machine-building sectors to share manufacturing techniques and markets via "free trade zones," allowing the companies to trade with one another without paying excise, Yushchenko said at a subsequent press conference. "We need to move to the creation of the joint ventures," Yushchenko said. Delivery to Macedonia of Ukrainian fuel transport systems and hydroelectric technologies was the second sector named by the Yushchenko and Crvenkovsky as a development priority. An overhaul of Macedonia's oil and natural gas transport system by Ukrainian pipe-manufacturing and laying companies, plus possible installation of Ukrainian hydroelectric equipment on Macedonia rivers, received special emphasis and would be the topic of a multi- departmental talks, Yushchenko said. Besides high tech and energy Ukraine and Macedonia hope to intensify cooperation in aerospace manufacturing, and transportation and construction, Cverenkovsky said. The giant Macedonia road-building company Granit is the largest foreign rail line builder in Ukraine. Granit's know-how has been critical in allowing the Ukrainian national rail company Ukrzheleznitsia to open modern rail service between the capital and the provincial centres of Kharkiv, Dnipropetrovsk. Macedonia also wants to export more medicines to Ukraine in exchange for Ukrainian agricultural technologies and goods, Cverenkovsky said. 
The two presidents also signed protocols committing their countries' governments to a 12-month programme devoted to developing trade. Relations between Ukraine and Macedonia are traditionally good. Ukrainian tanks, attack helicopters, and according to some reports, mercenaries, assisted Macedonia in the Balkan country's recent conflicts with Albanian separatists. 

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FOREIGN LOANS

Universal Bank offers Ukraine US$172m loan 

Universal Bank gave Ukraine US$172m as a programme systematic lending (PSL). The chief of Department on State Debt of the Ukrainian Ministry of Finance, Galina Pakhachuk, said the money would be transferred shortly. She noted that Universal Bank might lend US$250m in the first half of July according to the new programme. The government of Ukraine will initiate a new three-year programme of cooperation with Universal Bank. The target of the new programme is to get US$1.5bn and the first transfer is expected to be equal to US$500m in this year, New Europe reported.

World Bank approves US$251m loan for Ukraine 

The World Bank's Board of Executive Directors has approved the First Development Policy Loan for Ukraine for US$251.26m, the bank's representation in Kiev said, New Europe reported. 
"The fast-disbursing development policy loans (the successor to the PAL programme) are designed to support a comprehensive set of policy and institutional reforms" and they will remain the centre of the assistance programme for Ukraine, the release said. "The Development Policy Loan (DPL-1) is the first in a planned series of three annual loans designed to help the government translate its objectives into a sequenced and prioritised programme of actions.

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FOREIGN RELATIONS

Czech president visits Ukraine

Czech President, Vaclav Klaus, arrived on June 14th for a state visit, according to a Ukrainian government statement. Klaus met with his Ukrainian counterpart, Viktor Yushchenko, in face-to-face talks in Kiev's Maryninsky palace, New Europe reported.
Discussions were expected to focus on increasing economic cooperation between the two countries, and on possible Czech assistance for Ukrainian efforts to join the European Union. The two presidents were set to chair wider discussions including Ukraine's Foreign Minister, Borys Tarasiuk, and other senior Ukrainian government officials later in the day. A joint press conference was scheduled.

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